FINANCE

The government will trim the budget for infrastructure investment to 2 trillion baht in a bid to limit public debt to a maximum of 50% of gross domestic product, Deputy Prime Minister Kittiratt Na-Ranong said yesterday.

Mr Kittiratt, also the finance minister, said details of the investment package and a bill authorising loans of 2 trillion baht will be proposed for cabinet endorsement in mid-March.

The bill will be forwarded to parliament at the end of next month or in early April.

The government had announced a plan to invest 2.2 trillion baht in infrastructure projects over the next seven years, of which 80% would be spent on rail systems. Thailand's current debt to GDP is slightly above 40%.

"We will limit the spending to about 2 trillion baht so debt to GDP will not exceed 50% although we have a targeted ceiling [of debt to GDP] at 60% and I have many more investment projects," Mr Kittiratt said on the sidelines of a forum hosted by the Asian Development Bank (ADB) on reforms to the Thai rail sector.

According to the Public Debt Management Office (PDMO) at the Finance Ministry, of the total 1.6 trillion baht to be spent on rail projects, around 47%, or 753 billion baht, will fund high-speed train services.

About 386 billion baht will be allocated for projects under the Mass Rapid Transit Authority of Thailand, 95.5 billion baht for those of the State Railway of Thailand (SRT) and 372 billion to install a metre gauge railway system.

Theeraj Athanavanich, the PDMO's director of public infrastructure project financing bureau, said the domestic financial market is favourable for the government to mobilise fund with current excess liquidity of over 1 trillion baht.

Chula Sukmanop, director-general of the Office of Transport and Traffic Policy and Planning, vowed to push ahead the SRT's reforms, saying the rail sector has been overlooked. The SRT's financial obligations for infrastructure costs have resulted in its heavy debts.

According to the Transport Ministry, the SRT has shouldered an accumulated loss of 100 billion baht, including last year's loss of 10 billion.

The ADB said passenger traffic in the rail system has tumbled by 40% since 1992, while freight traffic had dropped 30% since 2002 despite the fact that it is more economical than other types of transport.

James Leather, ADB transport specialist, said the first priority for the SRT's reforms is transferring the 100-billion-baht debt to the government and recapitalising the agency with 3 billion baht in working capital.

"The SRT cannot pay for infrastructure and be a viable enterprise," he said.

"Railways with low traffic volume such as the SRT cannot cover infrastructure costs with operating revenues."

The full maintenance of tracks to keep them in good condition would cost 6.5 billion baht a year.

The SRT, however, has lacked the ability to fund track maintenance for 30 years. This has led to the current poor conditions of them, he said.